The big four’s magic realism

Five years ago the magic circle was having a terrible time. All the running was being made by highly profitable, London-focused silver circle firms. Clifford Chance and Linklaters were indulging in internal culling; Freshfields was dithering and Allen & Overy (A&O) was, frankly, going off the boil.

How things have changed. But which of the four has made the most strides since 2003?

A first glance at the figures shows the clear ­winner to be Linklaters, which has increased ­revenue by 79.6 per cent and average profit per equity partner (PEP) by 96.2 per cent. Meanwhile, ­Freshfields managed to get a PEP increase of 106 per cent on a 47.3 per cent increase in turnover – no mean feat.

And by the way, am I the only one to find the ­cavilling over currency values and exchange rates a tad bizarre?

It’s a rather xenophobic position – as if sterling is the one true, unblemished currency and the euro, dollar or anything other than true-Brit sterling somehow defile the purity of the figures. As if Freshfields’ recovery is somehow diminished by the fact that a substantial part of its business bills in euros (subtext: Johnny Foreigner doesn’t count). Billing in multiple currencies is the way of the world: get over it.

The fact that all four firms are making serious money out of globalisation is vindication of a decade of ­investment. The bull market of 2005-07 benefited firms with huge London practices – a ­success story that masked international firms’ achievements. A&O has always been the most ­cautious of the four, but more than half of its ­revenue now comes from outside the UK.

Within the Sweet Sixteen group of transatlantic elite law firms identified by The Lawyer this year, Freshfields and Linklaters are the ones turning heads. The needle match between the two will determine the direction of the magic circle, and as long as their average PEPs are beating the best of the Yanks’, then US firms will take the UK legal model seriously. It looks like the Brits may have won the argument – for now.